Disconnect between GDP growth and real wages sparks economic debate

 

MALAYSIA’S gross domestic product (GDP) growth continues to present a positive picture on paper, yet everyday citizens struggle to feel its benefits amid a rising cost of living.

Addressing this gap on The Yang Berhenti Menteri Podcast, former economy minister Datuk Seri Rafizi Ramli explained why high macroeconomic figures fail to translate into higher household incomes.

Rafizi noted that while GDP tracks total domestic production, gross national product (GNP) measures income retained by Malaysians.

Driven by the recent AI boom, export growth is largely dominated by foreign semiconductor giants that remit profits overseas rather than circulating them domestically.

With 95% of Malaysian businesses classified as small or micro-enterprises outside these high-tech supply chains, most workers remain isolated from top-line economic gains.

Ultimately, citizens judge economic performance by monthly salaries rather than abstract percentages.

Rafizi admitted that household demand is indeed strong in Malaysia and that the second-quarter growth was driven by sustained domestic demand and strong export.

“So why can’t the people feel it? Go ask people at the shops. Many indeed don’t feel it. And at the same time, the cost of living is getting higher, while salaries are not keeping up.

Rafizi explained that GDP measures everything produced inside the country, including output by foreign firms. It is not the same as wages.

In theory, salaries should track productivity, but since around 2010 that link has weakened in Malaysia: productivity has risen faster than pay.

A clearer distinction is between GDP and GNP. GDP counts all local production; GNP counts only income that stays with Malaysians and Malaysian-owned firms.

The gap between the two has widened, especially since early 2025 amid the AI-driven semiconductor boom, he said.

Much of the profit earned by foreign multinationals is repatriated as dividends, so the measured growth does not fully translate into local incomes.

Malaysia’s business landscape is highly skewed, he added. Roughly 95% of enterprises are small or micro; only a few thousand large firms drive most of the headline growth.

The majority of workers and self-employed people operate outside those high-growth supply chains. As a result, official growth rates matter far less to them than the size of their monthly pay packet. —  Focus Malaysia